2016 (2) TMI 1025 - AT - Central Excise

Exemption in terms of N/N. 10/1997 dated 01.03.1997 - manufacture of DG sets - denial on the sole ground that DG sets cannot be considered to be Scientific and Technical Instruments or Apparatus or Equipments etc. - Held that - the DG sets are entitled to the exemption in terms of the Notification. Further inasmuch as the exemption is being held in favor of the assessee as a consequence the assessee would not be entitled to the cenvat credit of duty paid on various inputs used in the manufacture of DG sets. As such the lower authorities would examine as to whether the appellant has availed wrong cenvat credit and the appellant would be duty bound to reverse the same - appeal allowed by way of remand.

Summary

Issues Involved:
Interpretation of Notification No. 10/1997 for exemption on DG sets supplied to University of Horticulture Sciences. Consideration of DG sets as Scientific and Technical Instruments, Apparatus, Equipments, etc. Entitlement to cenvat credit on duty paid inputs used in manufacturing DG sets.

Analysis:
1. The main issue in this appeal was whether DG sets supplied to a university would qualify for exemption under Notification No. 10/1997. The Tribunal clarified that the University of Horticulture Sciences falls under the category of public funded research institutions mentioned in the notification. However, the lower authority denied the exemption on the grounds that DG sets may not be considered as Scientific and Technical Instruments or Apparatus. This raised a crucial question of interpretation of the notification's scope.

2. The Revenue, represented by the Learned DR, initially relied on past Tribunal decisions that held DG sets did not qualify as technical goods under the notification. However, subsequent Tribunal decisions, such as in the case of CCE, Bangalore Vs. Lotus Powergear Pvt. Ltd., took a broader view and allowed the benefit of the notification to DG sets. The Tribunal emphasized the need for a wide interpretation in such cases, citing other relevant precedents like the case of M/s. Jackson Generators Pvt. Ltd. and Numeric Power System Ltd.

3. Another significant aspect raised by the Learned DR was the impact of granting exemption on the cenvat credit of duty paid on inputs used in manufacturing DG sets. This issue was not addressed in the show-cause notice or the original order. The Learned DR argued that if the exemption was granted, the appellant should not be entitled to claim cenvat credit on duty paid inputs. This added a layer of complexity to the decision-making process.

4. After considering the arguments presented, the Tribunal ruled in favor of the assessee, holding that DG sets are indeed entitled to the exemption as per the notification. Consequently, the assessee would not be eligible to avail cenvat credit on duty paid inputs. The lower authorities were instructed to verify if the appellant had wrongly availed cenvat credit and to ensure the reversal of any such credits. The appeal was thus disposed of with this decision, emphasizing compliance with the exemption conditions and cenvat credit regulations.

(Order pronounced and dictated in open court)